The Hidden Agenda of Extended Free Transfer Rates

More and more no interest charged credit card offers are sprouting like mushrooms in the present. However, customers should be wary because as more offers like these pop out, the higher covert fees and expense fees, which are attached to the cards, are becoming too.

In perspective, customers look like they are having a great deal compared to the credit card deals in the past because the interests of the cards are free and the balance transfers have increased.However, this is really not the case; in fact credit card owners are paying more for deals nowadays through hidden balance transfer fees and high standard interests.

According to watchdog, back in 2009, 16 months was the longest that a credit card does not charge any interest. But now, in 2012 the longest that major banks deal is 22 months and among these cards are the Barclaycard Platinum Credit Card with Extended Balance Transfer and the Halifax Balance Transfer Card.

But back in 2009, the most you have to pay for debt fees is 3% in 2012 it has increased to 4%. The Mastercard offered by the Amazon.co.uk even charges 5% from its customers as a transferring balance fee.

Consumers should be wary about the interest rates that their credit cards charge them and not merely look at how long transfer rates are extended. For instance, the Barclaycard Platinum Credit Card only charges a 2.05% fee. This is much lesser than the 3.5% charge of Halifax.

The periods that interest rates are free can extend from 16 months to 18 months. RBS and Natwest offer the longest interest rate free deals at the moment. Others that offer 16 months are the Tesco Clubcard Credit Card, the American Express Platinum Cashback Purchase Card and the American Express Rewards Credit Card.

But then, these companies are finding ways to silently make up for the extended free transfer rates that it offers customers. According to the Bank of England, the APR (annual Percent Rate) of the interest that credit cards generate has grown to 17.3 compared to the 16.5 back on May 2010.

Bankruptcy Scores: Another Measure of Credit-worthiness

According to experts, another way for lenders and credit-card issuers to estimate the ability of applicants to pay their debts is through their bankruptcy score. Your bankruptcy score determines your possibility, as a potential borrower, to file for a bankruptcy.

Sylvia Bronner, spokesperson of Citizens, said that a bankruptcy score is one of the many factors that are considered to assess the credit-worthiness of a borrower. Citizens not only use the credit scores of borrowers but also their bankruptcy scores to aid in the decision of what loan to give and to decide whether or not to issue credit cards.

Anthony Sprauve, spokesperson for Fair Isaac Corp. (Fico), said that a bankruptcy score is an instrument for lenders to distinguish borrowers who have a high probability of bankruptcy. Fico is the top third-party provider of credit, bankruptcy and other scoring systems.

In addition, Sprauve said that over 90 of the nation’s 100 biggest banks use the Fico scores.

Similar to a credit score, a bankruptcy score provides an assessment of a loan applicant’s payment and delinquency history, credit amounts, number and types of credit, and so on. However, a larger weight is given to the current debt load of the applicant.

Based on information from finance experts, bankruptcy scores have been present for more or less 20 years already, but it is usually hid from consumers’ view.

According to Scott Dressler, associate professor of economics at Villanova School of Business, depending on who produces the bankruptcy score, it may have a scale from 1 to 800 or from 50 to 950 or from 1 to 300. The higher the bankruptcy score, the more credit-worthy the applicant is.

Barry Robinson, executive vice president of consumer banking said that bankruptcy score are usually used by bigger lenders who make automated, less judgmental decisions and by credit card companies who handle a large scale of unsecured credit.

A Guide on How to Repair Your Credit

To compute your credit score, points are added when you make on time payments and points are subtracted when you pay late. Some other things that can have a negative impact on your credit score include large amounts of debt, making minimum or zero payments, repossessions or filing for bankruptcy. The following is guide on how you can repair your credit.

One way to remove the debts on your credit report is to file for a bankruptcy, which results to a clean slate in terms of your debt. Moreover, you will no longer have debts, and no longer lose points due to those debts and late payments. However, only a few creditors check the actual credit report.

Although you will lose points for filing a bankruptcy, it is not like having a large amount of debt where you lose points every month. For this reason, a few people consider filing for bankruptcy as a way to rebuild your poor credit.

In contrast, you can build positive information in your credit report by paying your current accounts on time or even before due. Paying on time also means having enough money available. To be able to have available money, you must also modify your spending habits or lifestyle.

Your credit score is a number that is somehow an assessment of your ability to pay your debts. In fact, paying off a small account will earn you as many points as making your monthly payments.

Contrary to belief of some people, repaying delinquent debts will not increase your credit score. It will even decrease your credit and remains in your report relative to the date of your last payment, unless you can eliminate it by discussing with the creditor.

In addition, marriage does not have any effect on your credit score. However, if you apply for credit as a couple, the person with poor credit will harm the one with good credit. It is recommended to wait for the completion of the repair process and not apply for joint credit.

Capital One to Pay $210M for Deceit

Capital One Bank is charged to pay 210 million dollars for the costs and compensation for the settlement of the deceptive credit card practices it has been involved in. The penalty for this giant company was imposed by the Consumer Financial Protection Bureau.

According to the Washington Post, McLean, the manager of the bank that is based on Virginia should repay the customers who availed the credit monitoring and add-on services that they charged. The bank allegedly hired a third party to prey on clients who were jobless and were suffering from bad credit. The callers from the bank would tell the customers that the services were free or compulsory. Some of them were even promised that their credit scores will boost when they apply for the service and that is not all; they were also told that it will grant them debt forgiveness when they have illnesses. Some of the customers were enrolled in the deal even without their knowledge, and they were fined for it.

This case is the first ever that the CFPB or the Consumer Financial Protection Bureau is handling and investigating since its creation in 2011. Republican lawmakers are opposed to its establishment and have been trying to shut it down for two years. However, in its two year operation, the CFPB is stronger than ever and now it is going after Capital One.

According to the CFPB director, Richard Cordray, the agency is going to make sure that the companies that are practicing deceptive acts contrary to law will not be tolerated and they will make sure that they will pay for their insolence. Breach

Ryan Schneider took responsibility for the illegal activities that their bank has done. As the credit card division president he admitted that they are liable for the work that their employees have done for them. The bank will be paying $25 million worth of damages to CFPB, another $35 million will be paid to the Office of the Comptroller of the Currency and they will be reimbursing $150 million worth of cash to over 2.5 million of their clients who had availed the service from August 2010 and January 2012.

Five Steps on How to Keep a Good Credit Score

One of the advantages of having a good credit score is that you can get good rate on a mortgage or any other type of loan. However, lending firms are not the only ones who uses your credit score but also some insurers, cell phone providers, landlords, and employers. Here are five tips on how you can build and keep a good credit score.

First, make timely payments because 35 percent of your credit score is derived from your history of paying your debts on time. Sign up for free email alerts that the majority of credit card companies send to the consumers. These will remind you more or less a week before so that you won’t forget paying.

Second, be cautious about how much of your available credit you are going to use because 30 percent of your credit score is affected by the amount you owe. It is good if you use 30 percent of it but it would be best if you use only 10 percent or less.

Third, do not close your old accounts because it will decrease your overall available credit. As a result, it might increase your utilization as well which, in turn, could more likely have a negative effect on your credit score.

Fourth, consider applying for different kinds of credit such as installment loans, those with a fixed payoff period, and revolving loans, those loans that are open-ended. Some examples of installment loans are auto and student loans, and an example of revolving loan is credit card. According to the credit agencies, it is best to have a few of each kind of credit.

Fifth, check for errors in your credit report. You can get a free copy of your credit report once every year from the big three credit reporting agencies – Equifax, Experian and TransUnion. If there are errors on your credit summary, account information or personal information, contact the creditor immediately.